Warnings over Welsh Landlord Regulation Scheme

The body that represents UK building societies has warned the Welsh Government that plans to regulate landlords could make rents more expensive for tenants.

The Building Societies Association (BSA) has urged Cardiff Bay administration to conduct a full cost benefit analysis of the proposal outlined in a white paper from May.

Under the plans, announced by Welsh Housing Minister Huw Lewis, anyone renting out properties privately must sign a register before being allowed to let.

All landlords will have to sign a compulsory register and pass a fit and proper persons test.

The law will apply to all landlords and letting agents, regardless of whether they rent out one property or many.

Warnings over Welsh Landlord Regulation Scheme

However, the BSA has warned that the measures could unintentionally push rents up as landlords try to recover costs they lose to registration. It has urged the Welsh Government to fully research the issue.

Mortgage Policy Advisor at the BSA, Colette Best, says: “The Homes for Wales white paper suggests that the private rented sector should be regulated, to include a register for landlords and an accreditation scheme for those managing rented properties. The expectation is that the scheme will be self-financing with a modest fee for registration.

“Whilst totally supportive of the principle, experience shows that establishing a regulatory system is often costly. A cost benefit analysis now will ensure that all relevant information is known before a decision is made.”

She explains: “Some of the areas of cost that will be involved are: setting up policies, decision-making panels and separate appeals panels, plus a system to monitor which landlords and agents have registered. Similarly, there will be a need to decide how to handle those who choose not to register and the accreditation scheme will need to be set up and managed, and codes of conduct enforced.

“Our concern is that if the end result goes beyond a modest fee it could be passed onto tenants, increasing their rent. Alternatively, if fees turn out to be very high it may make some landlords’ business models less viable, with the potential knock-on of reducing supply to the sector. Our suggestion is simply about making decisions with eyes wide open.”1

A spokesperson for the Welsh Government responds: “We thank the BSA for their contribution to our consultation on our proposals for the private rented sector.

“We will consider their response, along with the many others we have received, as part of our work on the housing bill, which is due to be introduced in 2013.”1

The BSA’s advice arrives as new statistics reveal that rents in England and Wales have reached a new high, as would-be homebuyers frustratingly fight for a home they can afford.

The average rent in England and Wales increased by 1% to £725 per month in July, exceeding a previous high of £720 recorded in October last year, according to LSL Property Services.

This puts average rent growth at 2.9%, up from 2.4% in June.

The private rental sector has experienced a surge in demand as hopeful buyers struggle to get onto the property ladder, as raising a high deposit and meeting lenders’ strict borrowing criteria remains tough.

In Wales, the amount of properties rented from private landlords has doubled in the last decade, to 182,000 homes, or one in seven.